Thursday, September 20, 2012

Prepare For A 15% Food Price Surge, Rabobank Warns

Rabobank has some of the best ag-commodity analysts around.
From ZeroHedge:

The record US, and global, summer drought has come and gone but its
aftereffects are only now going to be felt, at least according to a new
Rabobank report, which asserts that food prices are about to soar by 15%
or more following mass slaughter of farm animals which will cripple
supply once the current inventory of meat is exhausted.

From Sky News:
"The worst drought in the US for almost a century, combined with
droughts in South America and Russia, have hit the production of crops
used in animal feed - such as corn and soybeans - especially hard, the
report said. As a result farmers have begun slaughtering more
pigs and cattle, temporarily increasing the meat supply - but causing a
steep rise in the price of meat in the long-term as production slows.
"Farmers producing meat are simply not making enough money at the
moment because of the high cost of feed," Nick Higgins, commodity
analyst at Rabobank, told Sky News.

"As a result they will reduce their
stock - both by slaughtering more animals and by not replacing them."
Somewhat ironically. food prices are now being kept at depressed prices
as the "slaughtered" stock clears the market. However once that is gone
look for various food-related prices to soar: a process which will
likely take place in early 2013, just in time to add to the shock from
the Fiscal Cliff, which even assuming a compromise, will detract from
the spending capacity of US (and by implication global) consumers.

The
"mass liquidation" of animals - which Rabobank said will pick up pace
in the beginning of 2013 - will contribute to food prices hitting new
highs.

The cost of pork is expected to rise at the fastest pace - by 31% by the end of June next year - while beef costs could increase by up to 8%.

"This record cost of meat and dairy will combine with already-high
crop prices to increase food prices by 15% by the middle of next year,"
Mr Higgins added....MORE

Agrimoney has more:Slaughter spree hides preparations for hog revival

A
jump in hog slaughter to its highest since 2008, thanks to soaring feed
costs, disguises preparations by farmers to "accelerate" their response
to a recovery grain supplies, the US Department of Agriculture said.

The US pork cutout,
the wholesale price of a dressed carcass, dropped to $76.42 a
hundredweight on Tuesday, down 4.0% in a week and some 20% year on year.

These values, the
lowest since September 2010, were depressed by the surge in hog
liquidation by farmers seeking to avoid losses instilled by elevated
grain prices.

Hog slaughter last
week hit 2.43m head, the third-largest number on record, beaten only
during a liquidation wave in December 2007 and January 2008.

"Producers have been
quite aggressive in marketing hogs following the spike in feed costs,
and this has started to pull pork supplies forward," report from Paragon
Economics and Steiner Consulting said.

"The surge in hog slaughter numbers has put dramatic pressure on pork prices."

'Prices bottomed out'

However, drilling down
to sow data shows quite a different picture, with farmers maintaining
their breeding stock to position for a longer-term market recovery, once
easier feed supplies return the industry to profit, USDA livestock
specialist Rachel Johnson said....MORE